(Credit: Pixabay)A new report finds that while governments and financial institutions are laboring hard to unlock the investment needed to meet climate and sustainable development goals, green banks can efficiently and effectively help overcome market barriers and channel investments into low carbon technologies, thereby accelerating global efforts to meet climate goals outlined in the landmark Paris Agreement.
The State of Green Banks 2020, published by Rocky Mountain Institute, Green Finance Institute, and the Natural Resources Defense Council, provides a review of green bank activities and their potential worldwide. A green bank is a specialized financing institution that acts as the focal point for scaling up domestic investment in climate solutions.
The report reviews the impact and development of green banks in 36 countries. It aims to provide an understanding of green bank activities around the world that policymakers, funders, development finance institutions, and others can use to further the global green bank movement. It makes the case for green banks by highlighting the application of different green bank models across multiple geographies. In addition, the report hopes to help guide the development of the Green Bank Design Platform, which aims to support governments and institutions in the establishment of green banks and other green financing vehicles.
Currently, there are 27 operational green banks around the world that have invested more than $20 billion to date in new technologies ranging from rooftop solar to vehicle electrification and energy efficiency. In order to attract private investors into these markets, green banks use a range of financial instruments, including those that mitigate risk, and they are often the first to invest in new technologies and geographies. As a result, green banks have attracted over $2 of private investment, on average, for every $1 of own capital they invested into a project.
The report notes that an additional 25 countries are exploring setting up a green bank, with interest noticeable across all regions and all country income levels. Many green finance institutions are being set up to attract private investment and concessional finance, as well as to achieve Nationally Determined Contributions (NDCs) Paris Agreement on climate change, with the expectation that they will also improve air and water quality and spur economic development through job creation.
Doug Sims, Director and Senior advisor at NRDC's Green Finance Center, says: "After mitigation and adaptation, mobilizing finance is the third pillar of the Paris Agreement and is the necessary precondition for the success of the other two. To be equitable and sustainable, finance has to be rooted in national priorities and responsive to local needs. And to get to scale, it must connect to international networks. State of Green Banks 2020 demonstrates that in every region of the world, countries are turning to green banks to marshal resources in service of green and equitable transformation."
Report findings were collected by Rocky Mountain Institute between June and September 2020, with 46 surveys and 15 interviews conducted with representatives from 36 countries.
